Taxman bites back over snacks

The snack food industry has once again been attacked by HM Revenue and Customs in what one tax expert has called a "farcical" case.

Following the Revenue and Custom's victory in October against Cadbury's Dippin' Fingers, it has won another snack dipping case.

This time, the villain was McCoy's Dips - a bag of crinkle crisps accompanied by a pot of dipping sauce - made by United Biscuits.

Some of the finest legal minds in the country fought over what exactly constitutes food and what is a snack. Food is exempt from VAT, however snacks, specifically "potato crisps, potato sticks, potato puffs, and savoury products obtained by the swelling of cereals or cereal products; and salted or roasted nuts" are liable to the tax. So far, so clear. However, United Biscuits argued that its dipping snack required an element of preparation and therefore should be classified as food.

After all, nuts in a shell are free from VAT because de-shelling a nut constitutes an act of preparation.

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The VAT tribunal was unconvinced. Its chairman Colin Bishopp said: "We are satisfied that dipping a crisp into a pot of salsa cannot amount to preparation in any normal sense of the word." He threw out United Biscuit's appeal.

In taking this case to tribunal, HM Revenue and Customs denied it was using a sledge hammer to crack a nut, especially as United Biscuits has a turnover of £1.2billion and was said to be disputing just £100,000-worth of tax. However, a department spokesman said: "We have to pursue cases to safeguard revenues, even if they seem like a small amount of money."

Paddy Behan, VAT partner at Grant Thornton, said that United Biscuits had precedent on its side and were unlucky to lose its case: "There are elements of Greek tragedy about this farce because the case turns on the meaning of the word 'preparation'." Two years ago Procter & Gamble won an almost identical case claiming its Pringles Dippers needed "preparation".

People's eating habits have changed enormously since VAT was first introduced 30 years ago making the existing guidelines look antiquated. Consumers can now cook a three-course meal with little or no "preparation".